17th Oct 2007 12:11
Aviva PLC17 October 2007 News release 17 October 2007 AVIVA SETS OUT VISION TO UNLOCK VALUE AND DRIVE GROWTH Aviva plc ("Aviva") is hosting a presentation for investors and analysts todayin New York. Aviva's group chief executive, Andrew Moss, and his executive teamwill set out their vision for 'One Aviva, twice the value', focusing on newgrowth and efficiency targets designed to unlock value, drive growth andaccelerate the pace of the group's development in an increasingly global market. There will also be a presentation on the strategy for the further developmentof Aviva's fast-growing US operation, including the announcement of US thirdquarter new business sales. Aviva's new growth and efficiency targets are as follows: • UK: to grow long-term savings new business sales at least as fast as the market, while at least maintaining margins, thereby retaining a leadership position in its home market • Europe: to grow long-term savings new business sales by an average of at least 10% a year to 2010, while growing new business profit at least as fast • North America: to double the volume of US life new business sales within three years of the acquisition of AmerUs, while maintaining margins • Asia Pacific: to grow long-term savings new business sales by an average of at least 20% a year to 2010 • Deliver additional annualised cost savings of £350m by the end of 2009 Aviva will also measure progress against its growth and efficiency targets byreference to earnings per share (EPS), which is impacted by operating earnings,investment returns, taxation and capital changes, hence heightening the focus onoperating efficiency, profitable growth, investment returns and capitalmanagement. Andrew Moss, Aviva group chief executive, said: "Our vision of 'One Aviva,twice the value' puts a clear internal focus on growth and efficiency andsignals a period of transformation at Aviva. Today, we've announced ambitioustargets designed to unlock further value and drive growth from our existingbusinesses. Our scale and international reach means that we can now move fromorganising the company as a series of independent operations to managing Avivaas one group; drawing upon not only our size but also our collective knowledgebase and resources to accelerate the pace of growth in changing global markets.This programme, together with the more effective deployment of capital andresources and further investment in future growth through new markets and newdistribution, will provide real added value to our shareholders over the comingyears." GROWTH TARGETS FOR LONG-TERM SAVINGS In line with its new regional structure, Aviva has announced new growth targetsfor its life businesses. UK: Aviva is a leader in the UK long-term savings market, with a top threeposition in the savings, protection, pensions and annuity markets andmulti-channel distribution. The company plans to grow long-term savings newbusiness sales at least as fast as the market, subject to a continued focus ondriving overall profitability. This will be achieved through its competitiveproduct range, strong distribution and building on improvements already made incustomer and distributor service. Consistent with the 'One Aviva, twice thevalue' agenda, the UK Life business is already transforming its business modelto simplify its legacy systems and lower unit costs. Europe: Aviva is a leading life and pensions provider in Europe. The companyplans to grow long-term savings new business sales in the region by an averageof at least 10% a year to 2010, while growing new business profit at least asfast. This will be achieved by growing bancassurance and other distributionchannels, leveraging Aviva's significant scale in the region to createefficiencies and using the experience gained in its mature businesses of Europeto generate superior performance in the higher growth markets of central andeastern Europe. North America: Aviva acquired AmerUs in November 2006, making Aviva the numberone provider in the US indexed life market and the second largest in the indexedannuity market. The US business accounted for 9% of the group's long-termsavings sales in the half year to the end of June 2007. Aviva aims to double thevolume of US life new business sales within three years of the acquisition ofAmerUs, while maintaining margins. This will be achieved by an acceleration ofsales following the recent financial strength rating upgrade by A.M. Best, anexpansion of the product range, and further development of its distributionnetwork. Aviva also announces today that its integration of AmerUs into AvivaUSA is now complete, achieving in full the £23m ($45m) integration cost savings.The combined operation is already trading under the Aviva brand. Asia Pacific: Aviva aims to grow long-term savings new business sales by anaverage of at least 20% a year to 2010. This will be achieved by aggressivelygrowing the existing businesses in the region, in particular the high growthmarkets of India and China, while assessing the potential of new markets andmaximising the use of shared services and knowledge across the region. OTHER TARGETS REAFFIRMED Aviva confirmed its existing targets as follows: General insurance: Target to meet or beat a combined operating ratio of 98%. Aspreviously announced, the company retains some degree of uncertainty inachieving this for the 2007 full year following the £400m exceptional UK weatherlosses reported to date. Dividend: Target to grow the dividend using dividend cover in the range of 1.5to 2.0 times operating earnings after tax on an IFRS basis, while retainingsufficient capital to support future business growth. Return on Capital Employed (ROCE): The current target for return on capitalemployed is 12.5% calculated on a basis of smoothed investment returns. Avivaexpects to replace this with a new return on economic capital measure andtargets by the end of 2008. NEW EFFICIENCY SAVINGS Aviva plans to deliver £350m of new annualised cost savings over the next twoyears, measured at forecast 2007 expense levels. Of these, £300m is targeted tocome from the UK and £50m from Europe. Aviva is developing detailed plans forthe delivery of these savings and further financial information will beavailable with the full year results in February 2008. The total initial costsof delivering these savings will not exceed £350m. UK In the UK, Aviva has a market leading position and has already announced plansto transform its business model to retain its competitive position in both lifeand general insurance. By simplifying processes and maximising scale, Avivawill deliver further profitable growth and customer service benefits. • UK General Insurance: Aviva aims to deliver £200m of cost savings bythe end of 2008 from the completion of a number of change programmes (eg movingto a single insurance IT platform for personal lines), focused IT spend and asingle approach to marketing activity. The savings announced today areprojected to decrease the expense ratio to 12.4% in 2008 from 13.9% in 2006.Looking ahead, the business also plans to simplify structures further andre-engineer its processes. • UK Life: Aviva aims to deliver £100m of cost savings by the end of2009 by continuing to simplify its legacy systems and business processes. Thepartnership with Swiss Re to outsource the administration of almost threemillion life and pension policies, which started on 1 October, is a key catalystfor enabling further simplification of infrastructure and processes in the UKLife business. The cost savings will eliminate the expenses overrun in the UKLife business in 2009. These savings are in addition to Aviva's previously announced efficiency reviewto save £250m per year in its UK businesses from 2008 for an initial investmentof £250m, which is on track for completion by the end of this year. It is alsoin addition to the delivery of £130m savings from the integration of RAC, whichis now complete. Europe In Europe, Aviva is aiming to deliver £50m of cost savings from its more maturebusinesses by the end of 2009, in particular the Netherlands and Ireland, bymaximising the benefits of scale while delivering further growth. AVIVA USA NEW BUSINESS FIGURES Aviva announces today another excellent sales performance for its US businessfor the nine months to 30 September 2007. Total new business sales were up 41%on a pro forma basis, increasing to £2,705m ($5,384m) (2006: £2,103m; $3,828m).New business contribution increased by 41% to £102m ($191m) on a pro formabasis. New business margin improved to 3.5% (2006: 2.2%). - ends - Enquiries: AnalystsCharles Barrows, investor relations director +44 (0)20 7662 8115Amanda Wilbraham, senior manager, investor relations +44 (0)20 7662 2111 Media (UK)Hayley Stimpson, director of external affairs +44 (0) 7800 699662Vanessa Rhodes, group media relations manager +44 (0)20 7662 2482Ed Simpkins, Finsbury +44 (0)20 7251 3801 Media (US) Andy Merrill, Finsbury +1 212-303-7600 Notes to editors: • Sales targets are life and pensions PVNBP plus investment sales aspublished, gross of minorities. New business profit is new business contributionafter cost of capital, tax and minorities. Margins are a rati o of newbusiness contribution over PVNBP. • Presentation: A presentation to investors and analysts will take placeat 13:30 (BST) in New York. The presentation slides will be available on theGroup's website, www.aviva.com from 13:00 (BST). The presentation is beingfilmed for live webcast and can be viewed live on the Group's website or onwww.cantos.com. In addition a replay will be available on these websites latertoday. • Aviva is the leading provider of life and pensions to Europe(including the UK) with substantial positions in other markets around the world,making it the world's fifth largest insurance group based on gross worldwidepremiums at 31 December 2006. • Aviva's principal business activities are long-term savings, fundmanagement and general insurance, with worldwide total sales of £41.5 billionand assets under management of £364 billion at 31 December 2006. • The Aviva media centre at www.aviva.com/media includes images, companyand product information and a news release archive. • This document may include "forward-looking statements" with respect tocertain of Aviva's plans and its current goals and expectations relating to itsfuture financial condition, performance and results. These forward-lookingstatements sometimes use words such as 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe' or other words of similarmeaning. By their nature, all forward-looking statements involve risk anduncertainty because they relate to future events and circumstances which may bebeyond Aviva's control, including, among other things, UK domestic and globaleconomic and business conditions, market-related risks such as fluctuations ininterest rates and exchange rates, the policies and actions of regulatoryauthorities, the impact of competition, the possible effects of inflation ordeflation, the timing impact and other uncertainties relating to acquisitions bythe Aviva Group and relating to other future acquisitions or combinations withinrelevant industries, the impact of tax and other legislation and regulations inthe jurisdictions in which Aviva and its affiliates operate, as well as theother risks and uncertainties set forth in our 2006 Annual Report toShareholders. As a result, Aviva's actual future financial condition,performance and results may differ materially from the plans, goals andexpectations set forth in Aviva's forward-looking statements, and personsreceiving this presentation should not place undue reliance on forward-lookingstatements. Aviva undertakes no obligation to update the forward-lookingstatements made in this document or any other forward-looking statements we maymake. Forward-looking statements made in this document are current only as ofthe date on which such statements are made. Nothing in this announcement,including in particular the growth targets, should be construed as a forecast ofAviva's future profits or be interpreted to mean that Aviva's future revenue,profits or earnings per share will necessarily exceed or match those for anyprevious period. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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